Talking Pizza Sales

I have been a business consultant since 2002 and I work with about 200 clients a year.

Over that time I have helped entrepreneurs complete countless financial projections for their start-up companies. Over that same period of time I have developed a gut feeling for sales projections and typical expenses due to repeated exposure to different industries financial data.

Restaurants are a particularly popular business to start because of the low barriers to entry (inexpensive, low skill, quick customer attraction, etc.) and I have worked with my fair share of wanna-be restaurant magnates.

So when the opportunity came to start my own Delivery / Carry Our Pizza restaurant with a friend of mine I thought I had a pretty good handle on the business plan and financial projections. Now that we have been open five months I can say that I had the opening three months right but the last two months have been about 30% off the mark.

Looking back at the business plan I can see a few things that I didn’t expect:

The original plan was to be open from 4:00 PM until 1:00 AM on weekdays and 3:00 AM on weekends. This was based on the other stores in the market I live in and have lived in the past. Unfortunately, the pizza restaurant is not in either of these markets and the late night failed miserably.

This did however give us the chance to proove we were flexible and could respond to market demand (or lack there of) and we opened for lunch a month ago for which there has been moderate success.

A competitor had gone out of business one year prior which I believed left a hole in the market. They had significant sales but also significant overhead and therefore if we could open on a super thin budget we should be able to attract a percentage of their customers and have less expenses. The assumption was…they would never reopen. That assumption was wrong. Three months after we opened (two months ago) they reopened. Despite the fact that they are probably loosing money they are also taking away some of our sales.

Economic downturn. Not exactly sure how this affects a small town in North Dakota…but there is a definite psychological battle going on in the minds of all Americans. And…the first thing people cut when they worry about their finances is going out to eat. (Coincidentally, that usually lasts about two weeks and then we start going out to eat again).

Overall, I feel like we did a good job projecting our sales and expenses. More importantly, we also had a good idea of our break even point (about $15,000 a month) and so far we have been able to squeak out a little cash flow.

Finally, because we didn’t blow our advertising budget in the first few months (intentionally holding back marketing until the fervor of a new restaurant wore off) that meant we could ramp up spending on marketing and promotions over the last two months, when we needed it most.

I’ll let you know how it all turns out and if we ever reach our sales projection goals.